UPDATE: UK Government: Banks Must Fulfil Lending Promises
July 27 2009 - 8:08AM
Dow Jones News
U.K. banks must keep the promises they made on increasing
lending, Prime Minister Gordon Brown's spokesman said Monday, ahead
of a meeting later in the day between Chancellor of the Exchequer
Alistair Darling and bank executives.
"Clearly it's the prime minister's view that we want to see the
banks lend at the levels they have agreed to lend at," he said.
The spokesman said the government believes U.K. banks have
"sufficient" resources to meet their lending commitments, thanks in
part to the capital injection and insurance against losses being
provided by the government.
The prime minister has said he expects to see U.K. banks
increase lending by GBP70 billion this year.
That includes some GBP39 billion in extra lending agreed by
Lloyds Banking Group (LYG) and Royal Bank of Scotland (RBS), both
of whom have received large injections of taxpayer money. Other
U.K. lenders, including HSBC Holdings PLC (HSBA.LN) and Barclays
PLC (BARC.LN)) have also said they would increase mortgage and
consumer loans.
Asked if the prime minister believed the banks would meet their
commitments, the spokesman noted the year is only half complete but
said "we need to keep monitoring this."
Sunday, Darling said he was extremely concerned about lending to
small and medium-sized companies.
"It seems that while the cost of borrowing has gone down charges
to smaller companies has gone up," he said.
The British Bankers Association said Monday that various forms
of lending to small businesses from U.K. high street banks
increased by GBP391 million on the month in June, a sign of easing
credit conditions.
U.K. Business Secretary Peter Mandelson said the government
would focus on the cost of lending in Monday's meeting with bank
chiefs.
"They (banks) will argue that it is not so much the supply of
lending but the demand for it," he said in a television interview.
"No doubt both of these, demand and supply factors are relevant,
but the chancellor and I are not satisfied that lending is as it
should be."
Figures published by the European Central Bank earlier showed
companies in the 16 countries that use the euro also face financing
constraints which could hamper the recovery from recession.
The ECB said the annual growth rate of private-sector loans in
the euro zone slowed to a record low of 1.5% in June from 1.8% in
May.
-By Laurence Norman, Dow Jones Newswires, +44 207 842 9498;
laurence.norman@dowjones.com (Nicholas Winning contributed to this
article)